Low unemployment doesn’t mean a prosperous Michigan

The most important recommendation in our new state policy agenda is that we change the mission of state economic policy to a rising household income for all. A Michigan with a broad middle class where wages and benefits allows one to pay the bills, save for retirement and the kids’ education and pass on a better opportunity to the next generation.

It should now be clear that having a growing economy, or a low unemployment rate, or being business friendly does not lead to an economy that benefits all. All have been the goals of state policymakers now and in the past and all have been progressing in Michigan since the end of the Great Recession.

But Michigan, for the first time ever is a low-prosperity state with a strong domestic auto industry. Forty percent of households across the state unable to pay for necessities. This despite the headline grabbing statistic that the state’s unemployment rate is as low as it has been since the tech boom/bubble in 2000.

Why the disconnect? First too many of the new jobs are low paid and/or part time. City Lab in an article entitled Restaurant Jobs Are the New Factory Jobs notes that:

Restaurant jobs have grown faster than the overall economy every month since August 2010. (That’s more than 200 consecutive months!) … The trend is speeding up, but it’s not clear that we should cheer it—or whether it’s sustainable. Jobs are jobs, but these ones don’t pay very well. The typical private-sector job pays about $22 an hour. The typical restaurant job pays about $12.50.

And most of these new restaurant jobs are part time without benefits as well.

Second as David Leonhardt details in a column entitled Our Broken Economy in One Simple Chart all the income gains are now concentrated with those at the very top. He writes:

In recent decades, by contrast, only very affluent families — those in roughly the top 1/40th of the income distribution — have received such large raises. Yes, the upper-middle class has done better than the middle class or the poor, but the huge gaps are between the super-rich and everyone else. The basic problem is that most families used to receive something approaching their fair share of economic growth, and they don’t anymore.

As we wrote in our state policy report, the preeminent challenge of our times is figuring out how to reverse what is being called the Great Decoupling. Where even when the economy is growing––as it has been in Michigan since the end of the Great Recession––only those at the top are benefiting from that growth. The policy priority needs to be reestablishing an economy where as the economy grows all Michigan households enjoy rising incomes.

We propose a public investment agenda to boost education attainment, invest in quality of place and broadly share prosperity. Leonhardt suggests: “My list would start with a tax code that does less to favor the affluent, a better-functioning education system, more bargaining power for workers and less tolerance for corporate consolidation.”

The list of what policy levers matters most is what we should be debating. How to use federal and state policy to raise household income for all. Not assuming that that has happened because the unemployment rate is low. Or even worse, not caring about whether the economy is benefitting all, rather than the few.

Leonhardt is right that this is a choice, not inevitable, when he writes: “Yet there is nothing natural about the distribution of today’s growth — the fact that our economic bounty flows overwhelmingly to a small share of the population. Different policies could produce a different outcome.”

Lou Glazer is President and co-founder of Michigan Future, Inc., a non-partisan, non-profit organization. Michigan Future’s mission is to be a source of new ideas on how Michigan can succeed as a world class community in a knowledge-driven economy. Its work is funded by Michigan foundations.